Tenant Inspections Help Maintain Your Investment

If you have rental properties one of the best things you can do to maintain your investments is to conduct regular inspections of the property while tenant occupied. This is vital in staying aware of how your tenants are treating the property and will help on several important fronts;

1. Building tenant relations.
2. Risk management of both tenants and property.
3. Identifying small problems before they become large problems.
4. Identifying problem tenants whose leases should not be renewed.

This is an area that I see a lot of landlords neglect. Some may feel like they are being unduly intrusive into their tenants lives but periodic inspections really are essential to managing your risks properly. It is a great way to keep tabs on your investment and build rapport with the good tenants you want to stay.

In the TAR (Texas Association of Realtors) lease I use there is specific language that allows landlords and/or their representatives to enter the property to "survey or review the property's condition" at reasonable times. An attempt to contact the tenants is required to show the property but prior notice is not necessary for inspections of property condition. I cover this and all lease requirements with tenants when they sign and agree to the lease so you shouldn't get too much in the way of objections, but is usually best to go when tenants are available when possible. When I do these inspections for landlords I will typically give them a couple of days notice as a courtesy. Nobody likes surprises and a little notice goes a long way in maintaining good tenant relations.

Areas To Inspect

You can use a copy of the Inventory & Condition form tenants are given when they move in to make notes with, covering each area of concern. Check all mechanical items to insure they are working, such as microwaves, stoves/ovens, dishwashers, water heater, etc. Check all of the faucets, toilets and showers/tubs. Run the HVAC to make sure it is functional and note any damage to doors, windows, cabinets, flooring, etc. According to the lease the tenants sign they are responsible for maintaining anything they damage including door knobs, cabinet knobs, etc. with the exception of fair wear and tear.

Air Filters and Smoke Alarms

Tenant responsibilities as per the lease require them to maintain and replace light bulbs, batteries for smoke alarms, garage doors openers, and change air filters monthly. It's a good idea to carry some batteries and air filters with you. Though it is tenant responsibility, these items are important to keeping your HVAC in good shape and your property (and any possible liability) protected against negligence. A good idea is to go through with the tenants when they move in to show them where to change the filters and where the water shut-off valves are inside and outside. You may want to give them a filter or two as starters reminding them it is their responsibility. It never hurts to carry a copy of their lease and the copy of the Inventory and Condition form they are required to deliver to you within 7 days of move-in to reference their agreed to responsibilities as necessary.

Don't Allow Tenants to Do Repairs

If there are damages you should use only your contractors, or yourself, to do the repairs. The lease specifically forbids the tenants from doing repairs or modifications without landlord approval. I recommend using a contractor and just charge them. Then you'll have the receipt to justify the charge to them and you'll be able to make sure the repairs are done properly. Also, repair charges to the tenant should be paid before rent. For example, if there are $200 worth of repair charges, the tenant has to pay those first. All of this is covered in the TAR lease agreement as well. So if their rent is $1,500 per month and they try to give you a rent check for $1,500 but no repair fees included, the repair charge amount would come off of the top. $1,500 minus $200 means they still owe $200 more of their rent obligation. Charge late fees for incomplete rent until they are caught up. You can also count them delinquent on rent at that time and begin eviction process if it comes down to it.

Late Fee Leniency

I know many landlords are often too forgiving on late charges however this can lead to more headaches. If you want to cut them a break if they're late, only do it once and let them know the next time you won't be lenient. They can juggle something else to make their full rent. Good, qualified tenants generally won't have late issues, but those that do will take advantage of you if you let them. Evictions are rare and most times a tenant will get things squared away after an initial "pay or get out" notice to vacate is provided. Should evictions be necessary contact me to help you through the process. While the eviction process here in Texas is not too bad, it should usually be handled as delicately as possible.

Uneasy With Inspections?

Conducting these inspections on a 6 or 12 month basis will substantially help maintain properties and help you identify tenants that you don't want to renew. If doing so makes you feel uneasy just let me know and I'll be happy to conduct these inspections for you. I charge just $75 per hour to conduct the inspection and will provide you with a full report. Total time is typically no more than 2 hrs. Feel free to touch base with me if you have any questions or need other assistance.

One of the smartest things you can do as a real estate investor is to get into the habit of periodically evaluating your options: buy, hold or sell. This is especially true if you’re building your real estate portfolio as a primary investment vehicle that you’re hoping will fuel your children’s education or your retirement.

There’s rarely a clear “right” answer when it comes to managing an investment, which is why it’s important to consider what makes the most sense for you and your financial goals on an ongoing basis. Here are some questions to consider.

While you’d need a crystal ball to answer this one with 100% accuracy, you should be able to make an educated guess. For example, if you own a property in a town whose biggest industry is dying or in a place where a major employer has announced plans to relocate its headquarters, there’s a good chance your ability to earn money from that property will diminish in the coming years.

In that scenario, it may make sense to sell the property and reinvest the proceeds elsewhere.

On the flip side, if you bought a property years ago in an area that’s now gaining popularity, you’re likely well suited to hold the property and enjoy higher rent prices.

Do you need money right now (or will you soon)?

Whether you need a cash infusion to pay for a child’s tuition or a major medical procedure, it may make sense to sell a property rather than take on debt. Real estate is one of the most illiquid investments out there, so if you know you’ll need actual cash in the near future, selling the property and stashing the cash in an easy-to-access investment fund or savings account could prove beneficial for your long-term finances.

Could you realize a significant tax benefit from selling (or buying) a property?

This is especially important to consider in the wake of the tax law that passed last year. It’s also pretty complicated. Briefly, you should be aware of a few items in the tax code that could make it more (or less) beneficial to buy, sell or hold a property:

• Depreciation: The IRS gives you the option of claiming depreciation benefitsof your rental property as a way of reducing your tax burden. If claiming depreciation benefits can lower your effective tax rate, it may make sense to hold.

• Section 1031: This section of the tax code, also called a “like-kind exchange,” lets you avoid paying capital gains taxes on income from selling a rental property, as long as you buy another property within 180 days. Note that taking advantage of this benefit requires you to follow a lot of detailed rules. If you’re interested in learning more, get on the phone with your CPA.

• Reduced benefits for homeowners: The new tax code offers fewer tax incentives to own a home, which means people on the fence about buying may choose to rent for longer. This could make it a great time to buy additional rental properties if you’re in a position to do so. Keep in mind, though, that the rental market varies around the country, so the changes may have more impact on renter behavior in some places than others.

Is maintaining the property becoming a drain on your lifestyle?

Whether you’ve retired to travel the world or you just don’t feel like managing your properties anymore, it’s possible to outgrow real estate investing. But before you sell because you’ve had enough of the backend work, consider lightening your load by automating as much as possible with software that handles a lot of the paperwork you’d otherwise have to do.

Unless you really don’t need the income your rental property provides (and you can’t imagine that any of your descendants will, either), it may make be worthwhile to adjust your management style and continue bringing in the monthly rent.

Should Sell Versus Need To Sell

One final thought: In some situations, you need to sell an investment property. These situations are usually not predictable — maybe you lose your day job and you can’t keep up with the mortgage anymore. Not selling the property would create an acute financial lack that would significantly impact your life.

In other situations, you probably should sell the property. Maybe it’s in a town with a dwindling population where property values aren’t rising. In these situations, you won’t notice any day-to-day urgency around whether you hold or sell the property, even though you could be earning greater returns on your money elsewhere. When you absolutely need to sell, you won’t have to go through a list of questions to make your decisions; the decision will be made for you. Being alert to when you should sell, though, can help ensure that you’re making the most of the funds you’ve earmarked for investment.

Authored by Ryan Coon Ryan is a contributor to Forbes Real Estate Council and Co-Founder and CEO of Avail, the only all-in-one software solution designed for do-it-yourself landlords.. Published, Forbes, 7/23/18.

Pulls and Knobs Open the Door to a New Look

Repair and replace door hardware that makes rooms look dingy and outdated. We’ll show you how door and cabinet pulls, knobs, and hinges can give your home new sparkle.

You can slam cabinet and bedroom doors only so many times before you have to repair and replace hardware that is loose, broken, or just plain old and tired. It doesn’t take a lot of time or money to tighten loose hardware, clean globs of paint off a hinge, or replace cabinet pulls to brighten any room in the house.

Repair and Replace Kitchen Cabinet Hardware

Replacing or repairing knobs and pulls on cabinets and drawers is a quick way to give your old kitchen a new look.

Cabinet hardware can be simple or ornate, and ranges from $1 a knob to $45 or more. Here’s your game plan:

Count the number of knobs or pulls you need before you head to the hardware store. Estimating will cost you time and money.

To replace pulls, which are attached to cabinets by a screw at each end, measure the distance between holes -- not the length of pulls -- to assure a perfect fit.

If you’re switching from a two-hole pull to a one-hole knob, choose hardware with back plates that cover door scratches and holes.

Tighten, Polish, or Replace Door Hardware

Nothing ages a room like a loose doorknob. You can tighten mortise-style doorknobs by simply tightening the setscrew on the side of the doorknob. For cylindrical doorknobs, you’ll need to take the doorknob apart.

Replace dated doorknobs with sleek door levers. For easiest installation, choose a lever handle lockset made by the same manufacturer. Prices range from $20 to $160.

Buy a commercial polish, such as Wright’s or Weiman, to make brass doorknobs shine. Warm water and a little dish soap or a homemade paste of equal parts vinegar and baking soda will scrub off dirt and make stainless steel and glass doorknobs sparkle.

Homebuyer incentives can be smart marketing or a waste of money. Find out when and how to use them. Be sure you’re sending the right message to buyers when you throw in a homebuyer incentive to encourage them to purchase your home. When you’re selling your home, the idea of adding a sweetener to the transaction -- whether it’s a decorating allowance, a home warranty, or a big-screen TV -- can be a smart use of marketing funds. To ensure it’s not a big waste, follow these do's and don’ts:

Do use homebuyer incentives to set your home apart from close competition. If all the sale properties in your neighborhood have the same patio, furnishing yours with a luxury patio set and stainless steel BBQ that stay with the buyers will make your home stand out.

Do compensate for flaws with a homebuyer incentive. If your kitchen sports outdated floral wallpaper, a $3,000 decorating allowance may help buyers cope. If your furnace is aging, a home warranty may remove the buyers’ concern that they’ll have to pay thousands of dollars to replace it right after the closing.

Don’t assume homebuyer incentives are legal. Your state may ban homebuyer incentives, or its laws may be maddeningly confusing about when the practice is legal and not. Check with your real estate agent and attorney before you offer a homebuyer incentive.

Don’t think buyers won’t see the motivation behind a homebuyer incentive. Offering a homebuyer incentive may make you seem desperate. That may lead suspicious buyers to wonder what hidden flaws exist in your home that would force you to throw a freebie at them to get it sold. It could also lead buyers to factor in your apparent anxiety and make a lowball offer.

Don’t use a homebuyer incentive to mask a too-high price. A buyer may think your expensive homebuyer incentive -- like a high-end TV or a luxury car -- is a gimmick to avoid lowering your sale price. Many top real estate agents will tell you to list your home at a more competitive price instead of offering a homebuyer incentive. A property that’s priced a hair below its true value will attract not only buyers but also buyers’ agents, who’ll be giddy to show their clients a home that’s a good value and will sell quickly.

If you’re convinced a homebuyer incentive will do the trick, choose one that adds value or neutralizes a flaw in your home. Addressing buyers’ concerns about your home will always be more effective than offering buyers an expensive toy.

If you've been casually paying attention to the real estate market this year you've probably noticed or heard about the price gains in much of the metroplex. The latest figures are showing the median home price in May was at $204,900, up 5.1% from April. Wow! I noticed it starting to climb rapidly from about February; 1st about 2%, then 3% in March with a steady climb ever since. North Texas Real Estate Information Service has reported an 11% over-valuation of real estate here and clearly with the additional job growth coming with companies like Toyota relocating here, limited inventories of existing homes and slow building of new homes, we will continue to see much of the same. Most of the country is experiencing similar growth and while The National Association of Realtors reported last month that this is not another bubble, I would say hogwash. This is the kind of rapid growth that causes bubbles the worst. Just look to California for a stellar example.

That being said, what is a good course for existing homeowners and first time home buyers right now? Well, it all depends. If you're an existing homeowner and don't have a compelling reason to move; i.e., enlarging family, job transfer or pre-retirement down-sizing, then staying put and letting your equity rise with the tide may be enticing. Home buyers have been in a frenzy lately trying to take advantage of some of the lowest interest rates in years, which is fueling the price increases even more. If you're looking to take advantage of low interest rates but are stymied by the crazy competition in some North Texas areas, be sure you are adequately funding your offers to the sellers. Cash is king so make sure you have plenty of down-payment money on the line so the seller knows you are serious and well qualified. There is nothing worse than to have a contract fall apart because underwriting decides in final review that your cash position is too weak to support the loan. Everybody loses in that scenario, so sellers in a hot market will take the offer that has the most money for down payment; 20% or more is the rule for a winning offer in this environment. A 20% down payment resolves most of the risk for a lender so underwriting is usually a breeze. So with as many as 20 -25 offers for homes, many times in the first week or two, sellers are selecting only the strongest offers, not necessarily the highest.

And a word or two of caution on refinancing your current home to take advantage of the low interest rates. For many years Texas restricted refinancing so as to protect homeowners' equity positions but that all went out the window some years back with aggressive lobbying and a less than fiduciary minded state legislature. There are some smart ways to refinance and some not so smart ways. If you want to lower your payments, refinance only what you owe for a 10-15 year term. Often I see homeowners that refinance the full allowable value (80%) at 30 years so they can take out cash for remodels, college tuition, etc. But here is the rub on that score. The lenders will often encourage a full allowable loan and to up the ante a bit, the home's value is scored a bit higher in order to sell you on more loan. Though appraisal standards have tightened somewhat as a result of the bursting in 2007-2008, it is rapidly going back to the same old game. So when the market adjusts; glub, glub, glub, you're under water. For some of you that remember the 1988 real estate bust, I know many of the same factors were at play as with the most recent bust. Adjustable Rate Mortgages and lax lending practices had a lot to do with the bubble in 1988, just as they did in 2008.

Where Are The Best Values Now?

Certainly some of the better values for the money are in the areas of lesser demand.Of course, depending on where you work you'll want to consider the commute times into your value equations, but certainly areas away from the mainstream can offer the best deals. And you don't have to go out as far as Greenville to get them. Many existing and newer developments east and northeast offer great deals for downsizing or growing a family. Communities like Garland, Mesquite, Forney, eastern and southern Dallas areas like Casa View and Oak Cliff all have some terrific neighborhoods with affordable housing and reasonable commutes.

And if you're at or approaching retirement age and are wanting to downsize to reduce your overall expenses but stay near good medical facilities and metropolitan amenities, exploring the area a bit to see what the rest of the metroplex might offer should give you some good ideas. You never know, you might even find a really great restaurant or two along the way.

Spring is settling in nicely and a lot of us are looking at spring projects around the house. If you've read through some of the articles I post from HouseLogic by the National Association of Realtors® you have probably found a few good ones to help spruce up a bit. This month's article deals with some simple and inexpensive things to help with counter tops. Additionally you may be interested in browsing through HouseLogic's library for back splash ideas that can really help spruce up an old kitchen as well as cabinet refreshing ideas. When I'm showing clients older homes a lack of updates in a kitchen stick out like a sore thumb as needing attention and sometimes signaling neglect. Conversely, freshly painted or oiled cabinets and a new back splash helps show that the kitchen has some updates and the owner/seller care about the most frequently used room in the home.

Of course new appliances and tile flooring always help, but as a bare minimum one can freshen up the counters, cabinets and back splash for a very appealing presentation at very minimal costs. Several local building suppliers offer a wide variety of back splash options you can do yourself.

Check out all of HouseLogic's resource materials below and enjoy your spring projects! And as always contact me should you have any questions.

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